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Real Estate Big Data

NAR Report: How the home search process has changed in 2020

(REAL ESTATE BIG DATA) The 2020 National Association of Realtors annual report examined the home search process, with buyers utilizing online tools and agents to help find the perfect home.

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Woman holding phone in lap, doing an online home search.

There’s extensive data and topics to research when it comes to the National Association of Realtors annual report – everything from the trust home sellers place in agents, home financing, home sales (naturally), and real estate professionals and their relationship with buyers. Practically every angle of this important market has been broken down and examined to help deliver a clear picture of real estate sales across the nation. It’s all extremely valuable and highly worth perusing (psst: search “NAR report”).

Of course, searching for a home is a pivotal and significant part of the entire process, and the NAR report has delivered an in-depth analysis of everything as well. Let’s take a look and see what current trends were revealed.

Initial Search

When it comes to looking for a home initially, there are two main options that most buyers tend to go with – searching online versus contacting outside help (primarily a real estate agent, but family and friends were also viable resources).

With the advent of the pandemic in 2020 keeping several people at home, online searches were at their all-time highest (though this trend has continued to increase in recent years). In fact, a staggering 97% of all buyers utilized the internet at some point during the process.

With the advent of the digital listings and databases, it’s been shown that 43% of buyers are first looking for properties online, compared to 18% that go to a real estate agent first. Speaking broadly, first time buyers were more likely to take this step first, and there was a direct increase as buyers were older (though this percentage decreases after the
age of 64).

First Step Taken During the Home Buying Process, First-time and Repeat Buyers

Real estate agents were definitely the second most used avenue during the search process, and this did increase with aging demographics as well. Perhaps due to greater familiarity with searching online, younger generations did look up information on buying their first home at a higher rate than older counterparts (13% with the younger group versus 6% with the oldest).

First Step Taken During Home Buying Process, by Age

Information Sources

Of course, when it comes to where to find information and best to listen to, real estate professionals reigned supreme (91% reported successfully being helped by agents), and were the primary resources for every demographic – first time buyers, repeat buyers, new homes, and previously owned homes. Online searches and open houses came second and third respectively, and yard signs and online video sites also saw a lot of utilization. Methods after this – print advertisements, billboards, relocation companies, and television sources – finished out the bottom, but there was a wide margin between them and other methods.

Information Sources Used in Home Search, by First Time and Repeat Buyers, and Buyers of New and Previously Owned Homes

Length of Time From Searching to Buying

Perhaps again owing to the nature of the pandemic, the average time a buyer used from search to purchase decreased (a first since 2014), needing only eight weeks. A median of nine homes were looked at (five online only).

First time buyers needed a little more time on average than repeat buyers (nine versus eight weeks). Agents were still utilized frequently in all instances, and were usually contacted within three weeks of the initial search.

Length of Home Search, by Region

Difficulty During the Process

It should come as no surprise that searching for a home is a massive undertaking, and can prove to be an arduous process given the magnitude of what it entails. Just finding the right home to purchase is seen as the most difficult step, with 53% of buyers saying it gave them the most trouble. Paperwork followed at 17%, while simply understanding the process from start to finish was cited by 15% of buyers. As might be expected, first time buyers reported more difficulty across the board in all areas than repeat buyers.

Most Difficult Steps of Home Buying Process by First Time and Repeat Buyers and Buyers of New and Previously Owned Homes

Online Searching Trends

Online searching was first examined in 1995, where only 2% of buyers would utilize the internet during their home search process. This increased repeatedly until 2009 to 90%, dipped slightly until 2012, and has since generally been rising. It was almost an even split between mobile and desktop devices, with younger buyers focusing more on mobile and older more likely to use a desktop/laptop.

Percentage of Time Using Devices in Home Search, by Age

There’s actually a lot of information to process when it comes to online search trends – married couples versus single buyers generally searched online more, desktop searches utilizing video sites more often than mobile (46% versus 40%), and mobile users generally finding their home through their online searches while desktop might generally direct buyers to complete the process with a real estate agent.

Value of Website Features

Of course, how a website helps direct a buyer is extraordinarily important to the home search process. Photos were the clear primary resource here, with 89% of buyers saying that images were extremely useful in the process.

Detailed information about properties followed at 86%, and then there was a significant jump to the next most important feature, as buyers reported that floor plans were important 67% of the time).

Value of Website Features

Next Steps After Searches

Once homes were found online that proved attractive, more than half of first (51%) and repeat (59%) buyers would proceed to walk through the home. Following this, buyers might then see the home but choose to skip seeing the inside (37%), or would contact a real estate agent for additional information (35%). First time buyers tended to look for more information in general (on the home itself, about mortgages, and so on) to better prepare themselves.

Actions Taken as a Result of Internet Home Search, First-Time and Repeat Buyers

Method of Home Purchases

Perhaps the best conclusion to draw here is the home purchase itself. When that time comes, agents are still used the overwhelming majority of the time regardless of a buyer using mobile or desktop more than 50% of the time. With the former, an agent helps 88% of the time, and 90% of the time otherwise. Builder agents or direct contact with the previously owner – known or not – are far overshadowed here.

Method of Home Purchase, by Use of Internet

Satisfaction with the Search Process

Given all of the tools and data available to buyers, 64% reported that they were very satisfied with the entire process, 30% were somewhat pleased, and the remaining group said they were unhappy.

Satisfaction with Buying Process

Conclusion

The NAR Report really shows an incredibly exhaustive look into the home search process. Generally speaking, with so much information available online, buyers were eager to search with devices first and speak with real estate agents early on in the process. Further, digital resources such as photos, floor plans, and other data proved incredibly useful in helping determine if buyers should seek out the home or continue their search.

Perhaps the best conclusions to draw here are that first and repeat home buyers are actively consuming data from online sources, but still rely heavily on agents to help guide them through the process (including ultimately with purchasing the home). Given the unique circumstances of the 2020 Pandemic, it’s clear that searches and next steps are best started through websites and other repositories, and are then usually followed with experts that can provide their professional experience. It’s likely that these trends will – on average – continue in ensuring years.

Robert Snodgrass has an English degree from Texas A&M University, and wants you to know that yes, that is actually a thing. And now he's doing something with it! Let us all join in on the experiment together. When he's not web developing at Docusign, he runs distances that routinely harm people and is the kind of giant nerd that says "you know, there's a King of the Hill episode that addresses this exact topic".

Real Estate Big Data

NAR Report: The connection between home owners and financing

(REAL ESTATE BIG DATA) Financing a home purchase or an existing home is an exciting step. This NAR report gives us insight into what may be inhibiting home buyers.

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The yearning to own your own home has been and still is something people really want. According to the most recent Profile of Home Buyers and Sellers report by The National Association of Realtors® (NAR), data shows first-time and repeat buyers are still financing homes. The survey, which “allows industry professionals to gain insight into detailed buying and selling behavior” since 1989, surveyed buyers and sellers who purchased between July 2019 to June 2020.

How much do home buyers finance?

The NAR report shows 87% of all home buyers financed their home in 2020. This is up 1% from last year. First-time buyers are more likely to finance their homes more than repeat buyers with 95% and 83%, respectively.

Buyers who financed their home purchase, by adult composition of household

Also, 14% of all home buyers financed 100% of the entire cost of their home using a mortgage. First-time buyers’ median percent of finance was 93%, and it was 84% for repeat buyers. Overall, the median percent of finance for all buyers was 88%.

Percent of Home Financed by First-Time and Repeat Buyers, and Buyers of New and Previously Owned Homes

Does everyone put 20% down?

According to the NAR report, the median down payment for all home buyers was 12%. Among first-time buyers, it was 7%, it was 16% for repeat buyers. For the most part, down payments have either gone down or stayed about the same since 2005.

Median Percent Downpayment of First-Time and Repeat Buyers, 1989-2020

Over half (58%) of recent home buyers said they used their savings for financing their home purchase. This is a 2% decrease from last year but is still higher than the historical norm of 55% since 2000. Also, 38% of homeowners said they used proceeds from the sale of a primary residence to finance their new home, the same as last year.

For repeat buyers, 54% cited using proceeds from their previous sale to finance their new home. In 2014, it was 47%, and 25% in 2012. The high increase could be due to the increase in property values over time. On the other hand, 79% of first-time buyers used savings, and 22% used a gift from family or a friend to finance their home.

Sources of Downpayment, first-time and repeat buyers

Home Buying Obstacles

For 24% of home buyers, some sort of debt was cited as a reason for having to delay purchasing a home. Home buyers waited a median of 3 years to save for a down payment and lower debt before buying a home.

Years Debt Delayed Home Buyers from Saving for Downpayment or Buying a Home

For home buyers, 11% said saving for a down payment was the most difficult step in the home buying process, down 2% from last year. Expenses that made it difficult to save were student loans (47%), high rent or current mortgage payment (43%), and credit card debt (36%). To make a purchase, some home buyers made financial sacrifices like reducing spending on luxury or non-essential items (23%) and cutting entertainment spending (15%).

Expenses that delayed saving for a downpayment or saving for a home purchase, by adult composition of household

Is purchasing a home a good financial investment?

According to the NAR report, 83% of home buyers did view buying a home as a good investment, and 42% said it was even better than owning stock. Also, 85% of first-time buyers see it as a good financial decision compared to 82% of repeat buyers. For unmarried couples, it was 86%.

Buyers' View of Homes as a Financial Investment, first-time and repeat buyers, and buyers of new and previously owned homes

Overall, the NAR report shows first-time and repeat buyers are still financing to purchase a home. Repeat buyers tend to put more money down on a house using money from a previous home sale. First-time buyers tend to put less money down and use their savings. And, debt is without a doubt, the reason why most buyers delay purchasing a home.

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Real Estate Big Data

5 major ways AI is shifting the real estate scene and how to utilize it

(REAL ESTATE BIG DATA) Artificial intelligence is bringing a seismic shift to commercial real estate in everything from investing to sales to property management. Hold on!

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Woman working at desk with multiple desktops open to AI tools.

Forget about that location thing. Now real estate – especially commercial real estate – is about data, data, data. As in, Really. Big. Data. And AI is owed a large part of the credit for that.

A dizzying amount of data is being crunched and sorted and searched by artificial intelligence-enabled tools that are changing how deals get done and who will still have a job in the future.

The promise of AI to use data to predict the future is massive – and it promises to do that with more accuracy and efficiency, greater productivity, and less cost for commercial as well as residential real estate.

So, what, exactly, can AI do for commercial real estate? Let’s break it down.

What AI is

To put it simply, artificial intelligence is what lets Amazon’s Alexa talk to you and cars drive themselves. Its algorithms use data to mimic human intelligence, including learning and reasoning. Then there’s machine learning, where algorithms analyze enormous amounts of data to make predictions and assist with decision making. We’re putting them both under the same AI umbrella.

There are four main areas where AI is remaking the commercial real estate industry: development and investing; sales and leasing; marketing; and property management.

Development and investing

With its ability to quickly analyze a staggering amount of data, AI lets investors and developers make better data-driven decisions. More responsive financial modeling helps identify ideal use cases and project ROI under multiple scenarios using real-time data. Pulling in alternative data – say, environmental changes or infrastructure improvements – goes beyond traditional data points and can identify investment opportunities, such as neighborhoods beginning to gentrify. In fact, alternative, hyper-local data has become even more important as COVID-19 continues to upend property valuation models.

AI’s crystal ball comes from recognizing patterns in the data and continuing to learn from new information. It can forecast risk, market fluctuations, property values, demographic trends, occupancy rates and other considerations that can make or break a deal.

And it does all of this more efficiently, more accurately and less expensively than manual methods.

Sales and leasing

There’s a big question looming over AI and automation: Will technology put real estate brokers out of business? The short answer is, “No, but brokers need to step up their tech game.”

Keeping up with – and being open to – tech trends is essential. Clients’ ability to use online marketplaces to search for or list property will only grow, but there still is no substitute for expertise and the personal rapport that builds trust. Chatbots can’t negotiate (yet). Robots can’t show a space and weave details about the property into a story. (If you want to know more about using storytelling in real estate, check out this great marketing guide.)

But Big Data is such a powerful tool that brokers need to know how to harness it for themselves. Having more, and more nuanced, data about clients and properties means brokers can better match the two. They can be more confident in setting sales prices and rental rates. Becoming a “technology strategist” to help clients design an automation strategy for a property would be a great value add to their services. Even just starting out with a website chatbot to answer common questions would add a level of tech-savvy efficiency to communication with clients and prospects.

Marketing

Also a boon of Big Data for brokers: more sophisticated, targeted marketing for themselves, as well as for client properties.

Integrating AI with customer relationship management (CRM) tools brings a richer understanding of clients and prospects that can make choosing marketing channels and personalizing targeted content more precise.

Then there’s data-driven lead scoring. Property intelligence firm Reonomy says its commercial data mine – 52 million properties, 100 million companies, 30 million personal profiles, and 53 million tenants – can be searched in multiple ways to create custom prospect lists. (Check out Forbes.com’s “5 Ways Artificial Intelligence is Transforming CRMs” for a fascinating list of what AI can do, including analyzing conversations for sentiment analysis.)

Property and facility management

The Internet of Things (IoT) is already helping property and facilities managers control and predict energy costs, as well as proactively address maintenance issues. Integrating smart technology like thermostats and sensors with AI also means more efficient space planning. Smart security cameras and wi-fi tracking can create “people heat maps” that can identify underutilized or overcrowded areas.

IBM’s TRIRIGA does that and more. Part of the Watson project, TRIRIGA offers AI-driven insights to show how people are actually using a space and ensure a company has the right amount of space in the right areas. It can also analyze common questions from a chat log, then use that data to create an AI virtual assistant to automatically answer those questions – and update itself as it learns new data. Maintenance requests, room reservations and more can be fully automated.

Strategic space planning has become even more important during the pandemic, as work-from-home trends and safety concerns reshape offices as workers return. (Need ideas for your office? IBM’s Returning to the Workplace guide might be a good place to start.)

Barriers to adoption

There’s no question tech-enabled commercial real estate companies will have a competitive edge. The question is, when will more of them agree enough to adopt AI more widely?

PropTech with and without AI has exploded over the past few years – and that’s part of the problem. In an Altus Group survey, 89% of CRE executives said the PropTech space needs significant consolidation before it can effectively deliver on industry needs; 43% said that is already underway or will occur within 12 months.

Then there’s the undeniable learning curve that comes with any tech tool – an investment of time as well as money. The survey also showed concerns about regulatory requirements for data collection and management, having enough internal capacity, and nonstandard data formats.

Despite those perceived barriers, there’s also no question that innovation and disruption from AI are moving at a dizzying pace – and that commercial real estate needs to keep pace.

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Real Estate Big Data

As remote work explodes, workers flock to second cities

(BIG DATA) As remote working becomes more normalized, workers are choosing where they want to live, so second cities are changing the landscape.

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Fall leaves on a white and red house, living in second cities

Over the summer I had to move out of the SF Bay, my home and a famously high-rent hotspot. Life there had never been cheap, but the economic crash at the start of the year had made it nearly impossible to stay. (Not to mention the yearly wildfires were pretty inconvenient.)

It’s strange to admit, but going to a suburb on the other side of the country was easier than trying to continue living in my home city.

I’m not alone in feeling that way. Plenty of other workers in the digital sector are making the same choice, leading to the emergence of ”second cities” where predominantly white-collar workers have been moving to comfortably work from home.

Remote work has evolved from a once-privileged exception to practically being a hot business trend, and the merits have been widely embraced across industries where remote work is possible. In a study performed by UK employment firm Robert Walters, 86% of employers across 31 countries replied that they intend to keep their remote workforce in some capacity. In other words, the second city is here to stay.

Economics lecturer Michel Serafinelli suggested to The Guardian that cities will become less congested, high costs of living will begin to balance out, and skilled workers will be more widely distributed as a result of this transition.

Minnesota is one state that’s counting on these “second cities” to continue flourishing. By investing high speed broadband infrastructure, it hopes to attract wayward telecommuters to come live there and boost GDP.

So the flight from metropolis seems bound to continue, at least among certain workers. Based on 2018 statistics from the US Bureau of Labour, Black and Hispanic men in particular disproportionately work in the service sector, where just 1% of jobs can be performed remotely.

2020 has marked a major turning point for the US housing economy. In areas like New York, Seattle, San Francisco, and Los Angeles, residents have protested unaffordable rent for decades. Yet gentrification has slowly but relentlessly escalated, driving costs-of-living sky high and displacing long-term local residents. California has actually been slowly losing residents to this process over the last four years, saying goodbye to just under 200,000 in 2018 alone according to MSNBC.

Bloomberg City Lab breaks it down like this: “From the Bay Area and Los Angeles, Phoenix and Las Vegas are typically the most popular destinations. And New Yorkers showed a tendency to move to Florida — a state that had 22,000 more users looking to move there in the third quarter than leave.”

The effect is so dramatic, it may have had an impact on this year’s election results.

In other words, these second cities aren’t exactly new. And if this year is any indication, they are only going to grow in influence in the future.

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